A famous proverb says “Appetite comes with eating.” The shares of Mainstream Minerals Corporation (CVE:MJO) are surely hungry for more glory. Yesterday, they shone with a bright and quite convincing performance on the TSX Venture exchange (CVE).
The facts: MJO noted a new 52-week price high and set a trading volume record. During the session, the stock climbed to $0.165 on a never-seen-before turnover of 1.99M shares. Though MJO finished the day slightly lower, at $0.150, it still gained 20% from the previous close.
The company has not issued any new developments lately, so there is no obvious reason for the current stock advance. One of the possible explanation is that it is a speculatively driven rise of the shares. Another probable reason for the surge is a late reaction to some previously announced company events.
Most of them concern the acquisition of new properties by Mainstream through option agreements. The deposits are located in the Red Lake Area of Northwestern Ontario, Canada. Additionally, in February the company entered into another option agreement, this time with Premier Gold Mines Limited, for the exploration and development of the Bobjo Mine property.
It might be supposed that the news about the company expanding its projects could have led to the accumulation of some bullish energy. Perhaps it burst out these days and caused the rise of the stock. Maybe, investors reacted with a bit delay to the acquisition news.
The future progress of the shares, however, is far from guaranteed. Mainstream looks financially fragile. In the end of last November it had only $253K in cash and about $300K of working capital. The corporation recorded a net loss of $560K for 2010.
Clearly, acquiring more properties will not necessarily ensure a profitable business for Mainstream. The company has not realized any earnings from all these assets by far. Unless it happens, nobody will be totally sure how sensible the buying of new deposits will turn out to be.
